Inflation to boost use of gold as loan collateral, TCRB predicts

TCRB is the only bank offering a gold-for-cash service.

Mongkon Leelatum, chief executive officer and managing director, said the bank handled Bt1.75 billion worth of gold-for-cash loans in the first three months of this year, compared with Bt2.06 billion throughout 2011.

If the inflation rate increases, people who own gold are expected to use it to improve their liquidity, he said.

Gold-for-cash loans this year are expected to expand by 25 per cent, which would give them a 35-per-cent proportion of the bank’s loan portfolio, up from 17 per cent, he said.

Its gold-for-cash product has become more popular because it offers loans of Bt100,000-Bt300,000, while pawnshops provide no more than Bt100,000 and charge higher interest than TCRB.

Mongkon said inflation would affect white-collar workers first, followed by vendors. So this might be an opportunity to boost personal loans to the white-collar sector. Meanwhile, inflation might reduce consumers’ purchasing power, and this would have an impact on vendors.

He said the bank this year would be more cautious on its assets growth because of inflation, adding that it would not pursue growth as aggressively as last year.

The target for both loan and deposit growth this year is 12 per cent. In 2010, loan growth was 33 per cent and deposit growth 28 per cent.

TCRB this year aims to lend Bt14 billion, against Bt11 billion last year. Its outstanding loans are expected to reach Bt21.81 billion, up from Bt19.46 billion in 2011.

Outstanding deposits are expected to rise to Bt21 billion from Bt18.8 billion last year.

Mongkon said the bank would adjust its business plan if demand for the gold-for-cash product exceeds expectations. He said net profit this year was expected to increase to Bt180 million from Bt131 million.